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China Stocks Continue To Tumble, Central Bank Cuts Interest Rates

Shares in Chinese companies had fallen more than 7% by the close of trading on Tuesday, a day after the country's stock markets suffered their biggest losses since the global financial crisis.

Last updated on August 25, 2015, at 7:08 a.m. ET

Posted on August 24, 2015, at 11:02 p.m. ET

Mark Schiefelbein / AP

Stocks on China's major indexes had dropped more than 7% by close of trading Tuesday, extending the biggest four-day streak of losses since 1996, Bloomberg reported.

The decline followed even sharper losses on "Black Monday", a rough day of trading which affected markets around the world and saw a loss of 8.5% in China's Shanghai Composite.

After close on Tuesday, China's central bank said it would cut interest rates for the fifth time in nine months in a bid to shore up slowing growth, AP said.

Lower interest rates make it cheaper for people and businesses to borrow money to fund spending and investments, and they also make saving money in deposit accounts less attractive.

China's central bank cut the benchmark rate for a one-year loan to 4.6 percent from 4.85 percent. The interest rate on one-year deposits will fall to 1.75 percent from 2 percent annually.

There will also be more money available for banks to lend to businesses and consumers, thanks to a reduction in the amount that banks are required to set aside as a proportion of their total deposits. China cut this "reserve requirement" to 18% from 18.5%.

Monday's sell-off in China hurt both European markets and U.S. markets. Both the Dow Jones Industrial Average and the S&P 500 closed in negative territory, with the Dow losing nearly 600 points and the S&P some 4% lower.

Mark Schiefelbein / AP

But signs are that despite this latest set of declines in China, the rest of the world won't have such a bad day on Tuesday.

While Tokyo's Nikkei index closed lower after a volatile day, other indexes in Hong Kong, Australia, and South Korea all rose slightly, the BBC reported.

The Chinese interest rate cut will help shore up some of the negative sentiment in global stock markets about the country's rate of economic growth.

There's still lingering uncertainty over whether the U.S. and U.K. will raise benchmark interest rates, and concern among analysts that the Chinese government is abandoning some of the measures it had been taking to support markets in the country.

Wei Wei, an analyst at Huaxi Securities Co. in Shanghai, told Bloomberg: "It's panic selling and an issue of confidence. The government won't step in to rescue the market again as it's a global sell-off and it's spreading everywhere now. It's not going to work this time."

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